SECTION 7. PREPAID

SUBSCRIPTION INCOME (§ 455)

.01 Prepaid subscription income.

(1) Description of change and scope. This change applies to an accrual method taxpayer that wants to change its method of accounting for prepaid subscription income to the method described in § 455 and the regulations thereunder, including an eligible taxpayer that wants to make the “within 12 months” election under § 1.455–2. This change was formerly provided, in part, in Rev. Proc. 84–76, 1984–2 C.B. 751. (2) Manner of making the change.

(a) This change is made using a cut-off method and does not apply to any prepaid subscription income received before the first taxable year to which the change applies. Any prepaid subscription income arising prior to the year of change is accounted for under the taxpayer’s former method of accounting. See section 2.06 of this revenue procedure. (b) In accordance with § 1.446–1(e)(3)(ii), the requirement of § 1.446–1(e)(3)(i) to file an application on Form 3115 is waived and a statement in lieu of the Form 3115 is authorized for this change. The statement must be identified at the top as follows: “CHANGE IN METHOD OF ACCOUNTING FOR PREPAID SUBSCRIPTION INCOME UNDER SECTION 7.01 OF THE APPENDIX OF REV. PROC. 97–37.” The statement must set forth the information required under § 1.455–6(b). .02 Reserved.